MODULE III: ENTREPRENEUR

Meaning and Definition of an Entrepreneur

Entrepreneur is a person who undertakes an enterprise. The process of creation is

called entrepreneurship. An entrepreneur can be considered as a person who bears the
risk of operating a business in the face of uncertainty about the future conditions. Who
innovates and introduces something new in the economy Who shifts resources out of
an area of lower and into an area of productivity and greater yield Who plays a critical
role in economic development and an integral part of economic transformation. To
conclude an entrepreneur can be considered as an agent who buys the four factors of
production at certain prices in order to combine them into product with a view to
selling it at uncertain prices in future.

Entrepreneur is one who is endowed with more than average capacities in the task of
organizing and coordinating the factors of production, i.e. land, labour capital and
enterprises.

Peter F. Drucker defines an entrepreneur as one who always searches for change,
responds to it and exploits it as an opportunity. Innovation is the basic tool of
entrepreneurs, the means by which they exploit change as an opportunity for a
different business or service.

International Labour Organization (ILO) defines entrepreneurs as those people who

have the ability to see and evaluate business opportunities, together with the necessary
resources to take advantage of them and to initiate appropriate action to ensure
success.

Evolution of Concept

The word „entrepreneur‟ is derived from French word „Entreprendre‟ which was used
to designate an organizer of musical or other entertainments. It means „to undertake‟.
The Frenchmen who organized and led military expeditions were referred to as
“entrepreneurs”. Around 1700 A.D. the term was used for architects and contractor of
public works. In many countries, the term entrepreneur is often associated with a
person who starts his own new business. Business encompasses manufacturing,
transport, trade and all other self employed vocation in the service sector.
Entrepreneurship has been considered as the propensity of mind to take calculated risk
with confidence to achieve predetermined business objectives. According to oxford
English dictionary in 1897 was defined as the director or manger of public musical
institution who gets entertainment in the form of musical performance.
16th century: In 16th century it was applied to those who were engaged in military
expeditions.
17th century: In 17th century it was extended to cover civil engineering activities such
as construction and fortification. But it was Richard Cantillon, an Irishman living in
France who first used the term entrepreneur to refer to economic activities. According
to Cantillon “An entrepreneur is a person who buys factor services at certain prices
with a view to selling its product at uncertain prices”.
18th century: In the beginning of the 18th century the word was used for economic
aspects. In the way the evolution of the concept of entrepreneur can be considered to be
over more than four centuries.

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Functions of Entrepreneur

Performs functions such as planning, organizing, managing, risk bearing and decision
making.

1. Planning of the project: He is the organizer to conceive the idea of launching the
project and to Program to structure of the business.

2. Management: The entrepreneur is also responsible for the management of business.

He tries to have a least cost combination of factors of production.

3. To Face Risks: He faces uncertainly and bears risks in his business uncertainly
comprising those risks against which it is not possible to insure. He also faces the risk
of other producers may enter the market

4. Distribution of Rewards: He is responsible of distributing the rewards to all factors

of production. He pays the reward in the shape of rent, wage, and interest and bears
the risk of profit or loss himself

5. Sale of Products: An entrepreneur is also responsible of marketing, advertising. He

wants to maximize his profits by selling his product in the market.

6. Scale of Production: He decided the scale of business in according with the provision
of capital. Then, he takes the decision of what where and how to produce goods.

7. Joint stock Organization: In a partnership, the entrepreneurial functions are divided

between the partners. But in public limited company, the board of directors takes this
responsibility with nationalized enterprise; the entrepreneurial decisions are left to the
government or a body to which government has delegated Its Powers.

Characteristics of Entrepreneur

Entrepreneur is a person of telescopic faculty drive and talent who perceives business
opportunities and promptly seizes them for exploitation. Entrepreneur needs to possess
competencies to perform entrepreneur activities. Table bellow gives core competencies.

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Types of Entrepreneur

There are Different Types of Entrepreneurs & so also the Important Classifications of
Entrepreneurs. Some of the Important Classifications of Entrepreneurs & Different
Types of Entrepreneur in each Classification are enumerated below:

1. Classification of Entrepreneurs based on Functional Characteristics :

a. Innovative Entrepreneurs : Such an Entrepreneur introduces New Goods /
Products / Services or New Methods of Production or discovers New Markets
or Reorganizes his Enterprise. Entrepreneurs in this Group are characterized by
an aggressive collection of information for trying out Novel Combination of
Factors. Such Entrepreneurs do well when a certain level of development is
already achieved; they look forward to improve upon the Past.
b. Imitative or Adoptive Entrepreneurs :Such Entrepreneurs do not Innovate
themselves, but Imitate or Copy Techniques & Technology innovated by other
Innovative Entrepreneurs. They are characterized by their readiness to adopt

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 Successful Innovations by other Entrepreneurs. They are particularly suitable for
under Developed Regions as Adoption saves Costs of Trial & Error.
c. Fabian Entrepreneur: They display great caution & skepticism in experimenting
with any change in their Enterprise. They adopt changes only when there is an
imminent threat to the very Survival of their Enterprise.
d. Drone Entrepreneur: These Entrepreneurs are characterized by a Die – Hard
Conservative Attitude. They do not easily seize opportunities to make changes in
their production techniques or the Technology employed, even at the Cost of
Low Returns on their Investments compared to other similar enterprises. Such
entrepreneurs may even incur Huge Losses but they will not be ready to make
Changes in their existing production techniques.
2. Classification of Entrepreneurs on the Development Angle :
a. Prime Mover: This Entrepreneur sets into Motion a Powerful Sequence of
Development, Expansion & Diversification of Business.
b. Manager: Such an Entrepreneur does not initiate Expansion & is content just
staying in Business.
c. Minor Innovator: He contributes to Economic Progress by finding better use for
Existing Resources.
d. Satellite: The Entrepreneur assumes a Supplier‟s Role & slowly moves towards a
Productive Enterprise.
e. Local Trading: Such an Entrepreneur limits his enterprise to the Local Market.
3. Classification of Entrepreneurs based on Types of Business :
a. Manufacturing: Entrepreneur is involved in Production of Value Added Goods by
using Various Inputs – Raw Materials, Consumables, Labor, Power & Other
utilities. Goods can be a Variety of Products like Castings, Forgings, Soaps,
Detergents, Various chemicals, Textiles, Plastic Components, Footwear, School
Bags, Electronic & Electrical Items, Computer Related Products etc.
b. Wholesaling : An Entrepreneur with such a Business sells Products to the Middle
Men or Retailers
c. Retailing: An Entrepreneur with such a Business sells Products directly to the
Consumer‟s or End Users.
d. Service: An Entrepreneur in this Business sells Services & not the Products.
4. Classification of Entrepreneurs as per the Behavioral Scientists :
a. Solo Operators: Such Entrepreneurs usually Work alone & if needed at all, employ
a few employees to assist. Most of the Entrepreneurs begin their Entrepreneurial
Career in this fashion.
b. Active Partners: These Entrepreneurs start their enterprise in Partnership. All the
Partners actively participate in the Operation of the Enterprise. Entrepreneurs
who only contribute funds to the enterprise but do not actively involve in
Business Activity are called simply “Partners”.
c. Inventors: Such Entrepreneurs with their Competence & Inventive Nature Invent
New Products. Their Basic Interest lies in Research & Innovative Activities.

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 d. Challengers: Such Entrepreneurs plunge into Business because of the Challenges it
presents. When One Challenge is satisfied, they will be on the lookout for New
Challenges.
e. Buyers: Such Entrepreneurs do not wish to bear much Risk. Hence, in order to
reduce Risk involved in establishing a New Enterprise, they wish to buy an
Ongoing One.
f. Life Timers: Such Entrepreneurs take Business as an Integral Part of their Life.
Usually, the Family Enterprise & Businesses which call for Personal Skills fall in
this Category of Entrepreneurs.
5. Classification of Entrepreneurs as per technology:

a. Technical: Concentrates more on production than through sales and marketing

through the demonstration of his innovative abilities in matter of production of
goods and rendering of services and skills in production techniques.
b. Non-technical: Not concerned with technical aspects of the product and are
concerned only with the alternative distribution and marketing strategies to
promote their business.
c. Professional entrepreneur:

6. Classification of Entrepreneurs as per Growth

a. Growth: Are those entrepreneurs who take a high growth industry which has
substantial growth prospectus.
b. Super growth entrepreneurs: Are those who have shown enormous growth of
performance in their venture and Identified by liquidity of funds, profitability
and gearing.

7. Classification of Entrepreneurs as per stages of development

a. First generation: One who starts an industrial unit by his innovative skill who
essentially an innovator who combines different technologies to produce a
marketable product or service.
b. Modern: Undertaking those ventures which suit to the changing and current
demands in the market.
c. Classical: Is one who is concerned with the customers an marketing needs through
the development of a self-supporting venture and is a stereotype entrepreneur
whose aim is to maximize the his returns at a consistent level with the survival of
the firm.

8. Classification of Entrepreneurs According to the area

a. urban
b. rural
9. Classification of Entrepreneurs According to the gender
a. men
b. women

10. Classification of Entrepreneurs According to the sale of operation

a. small
b. medium
c. large

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Women Entrepreneur

Factors influencing women entrepreneur

 Economic independence
 Establishing their own creativity
 Establishing their own identity
 Achievement of excellence
 Building confidence
 Developing risk taking ability
 Motivation
 Equal status in society
 Greater freedom and mobility

Functions of women entrepreneur

• Exploration of the prospects of starting a new business
• Pool up the resources
• Establish the industrial enterprise
• Manage the business
• Development of strategies.
• To assume risk & uncertainty
• To develop business & business decision
• Motivation
• Supervision & leadership

Challenges in the path of women entrepreneurs

 Lack confidence
 Problem of finance & working capital
 Socio- cultural barriers
 Production problem
 Inefficient Marketing Arrangements
 Male dominations

Steps to be taken to develop women entrepreneurship

1. Provide basic education & establish special institutions to train women
entrepreneurs.
2. Conduct especial workshops to women for better awareness.
3. Liberal financial support to motivate women entrepreneurs
4. Favourable credit policies to women
5. Provide better marketing help to women entrepreneurs
6. Provide need- based training for development of skills & entrepreneurship.
7. Establish self-help groups, Voluntary agencies & social welfare organization for
women entrepreneurs
8. Provide concessions to women entrepreneurs.
9. Provide a common platform to all the concerned agencies & R & D organization to
achieve an interacted approach for promoting women entrepreneurs.

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Intrapreneurs
Is an emerging class found in large industrial organizations who emerge from within
the confines of the large industrial organizations. Top executives are encouraged to
catch hold of new ideas and convert them into products through research and
development activities within the framework of the organization. Dependent, does
not bear risk in business, does not raise funds, operates from inside. It is found in
developed countries that such Intrapreneurs in large number are leaving the
organization and started their own enterprises. Many of such Intrapreneurs have
become exceedingly successful in their ventures. Very popular in developed countries
like America. Many Intraprenuers are found leaving their jobs in big organizations
and starting their own enterprises and have become exceedingly successful in their
ventures. Are causing threat to the organizations they leave who inaugurate new
products.
The difference between entrepreneurs and Intrapreneurs is given in table

Distinction between Entrepreneur and Manager

Often the two terms namely entrepreneur and manager are considered as synonym.
However the two give different meaning. The major points of distinction between the
two are presented in table

Stages in the development of the entrepreneurial process

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Entrepreneurship is a process of comprising several distinct stages.

1. Perceiving ,identifying opportunity: Consumers & business association, members of

distribution system, independent technical organizations consult entry etc.
government organizations & R&D centers also provide new ideas
2. Evaluating opportunity: It involves length of opportunity, its real perceived value
its risks & resources, with personal skills goals of entrepreneur & its uniqueness or
differential advantages in its competitive environment. Description of product,
Agreement of opportunity, Assessment of the entrepreneur, Resources needed,
Amount & sources of capital, Profit expected.
3. Drawing up a business plan: a business plan is nothing but a description of the
future direction of the business. A good business plan is very essential to develop
the opportunity and to determine the resources received. It formulates all plans i.e
Description of business & industry, Technology plan, Financial plan, Organization
plan, Production & operation plan, Marketing & distribution plan, Summary
4. Marshalling resources: an Entrepreneur should have good idea of the various
resources required with respect to quality, quantity, prices and sources. the
entrepreneur identifies the sources from where the finance and the human resource
can be arranged. Here, the entrepreneur finds the investors for its new venture and
the personnel to carry out the business activities.
5. Creating the enterprise: an entrepreneur decides on the future prospects of the
business, i.e. its growth and development. Here, the actual growth is compared
against the planned growth and then the decision regarding the stability or the
expansion of business operations is undertaken accordingly, by an entrepreneur.
6. Consolidation and management: The operational problems of the growing
enterprise must be examined. Once the funds are raised and the employees are
hired, the next step is to initiate the business operations to achieve the set goals.
First of all, an entrepreneur must decide the management structure or the hierarchy
that is required to solve the operational problems when they arise.

Perceiving, Evaluating Drawing up a

identifying business plan
opportunity
opportunity

Marshalling Creating the Consolidation

resources enterprise & management

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Role of entrepreneurship economic development

Economic development essentially means a process of upward change whereby the real
per capita income of a country increases for a long period of time. The crucial role
played by the entrepreneurs in the western countries has made the people of
underdeveloped countries conscious of the significance of entrepreneurship in
economic development.

The Importance of Entrepreneurial Resource as a Crucial Input in the Process of

Economic development has now been widely recognized by eminent scholars,
economists & policy makers.

With Growing Emphasis on the Role of Small Scale & Medium Scale Enterprises in
view of their contributions to employment generation, regional development & overall
economic growth, a wide range of schemes & programs aimed at accelerating the
tempo of new activities in the decentralized sector has been devised in many
developing countries.

India is a Developing Economy aiming at Decentralized Industrial Structure to

overcome Regional Imbalances in levels of Economic Development. Small Scale
Entrepreneurs in such Industrial Structure play a very vital role to achieve Balanced
Regional Development. It is a well established fact that Small Scale Enterprises provide
immediate Large Scale Employment ensuring a more equitable distribution of National
Income, Generate Large Scale Indirect Employment opportunities in support
organizations around the Industrial Clusters / Estates, Improve Living Standards of
People & also most important, facilitate an effective resource mobilization of capital &
skills which might otherwise remain idle.

The important role that an entrepreneur plays in the economic development of a country can be
summarized as follows

1. Entrepreneurship promotes capital formation by mobilizing the idle saving of the

public.
2. Entrepreneurship provides immediate large scale employment thereby reducing
the unemployment problem in the country.
3. Entrepreneurship promotes balanced regional development.
4. Entrepreneurship helps reduce the concentration of the economic power.
5. Entrepreneurship stimulates equitable redistribution of wealth, income and even
political power in the interests of the country.
6. Entrepreneurship encourages effective resource mobilization of capital and skill
which otherwise would remain unutilized and idle.
7. Entrepreneurship also induces backward and forward linkages which stimulate
the process of economic development in the country.
8. Entrepreneurship promotes export trade which is an important ingredient for
economic development

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Role of entrepreneurship economic development

Economic development essentially means a process of upward change whereby the real
per capita income of a country increases for a long period of time. The crucial role
played by the entrepreneurs in the western countries has made the people of
underdeveloped countries conscious of the significance of entrepreneurship in
economic development.

The Importance of Entrepreneurial Resource as a Crucial Input in the Process of

Economic development has now been widely recognized by eminent scholars,
economists & policy makers.

With Growing Emphasis on the Role of Small Scale & Medium Scale Enterprises in
view of their contributions to employment generation, regional development & overall
economic growth, a wide range of schemes & programs aimed at accelerating the
tempo of new activities in the decentralized sector has been devised in many
developing countries.

India is a Developing Economy aiming at Decentralized Industrial Structure to

overcome Regional Imbalances in levels of Economic Development. Small Scale
Entrepreneurs in such Industrial Structure play a very vital role to achieve Balanced
Regional Development. It is a well established fact that Small Scale Enterprises provide
immediate Large Scale Employment ensuring a more equitable distribution of National
Income, Generate Large Scale Indirect Employment opportunities in support
organizations around the Industrial Clusters / Estates, Improve Living Standards of
People & also most important, facilitate an effective resource mobilization of capital &
skills which might otherwise remain idle.

The important role that an entrepreneur plays in the economic development of a country can be
summarized as follows

1. Entrepreneurship promotes capital formation by mobilizing the idle saving of the

public.
2. Entrepreneurship provides immediate large scale employment thereby reducing
the unemployment problem in the country.
3. Entrepreneurship promotes balanced regional development.
4. Entrepreneurship helps reduce the concentration of the economic power.
5. Entrepreneurship stimulates equitable redistribution of wealth, income and even
political power in the interests of the country.
6. Entrepreneurship encourages effective resource mobilization of capital and skill
which otherwise would remain unutilized and idle.
7. Entrepreneurship also induces backward and forward linkages which stimulate
the process of economic development in the country.
8. Entrepreneurship promotes export trade which is an important ingredient for
economic development

Entrepreneurship development programme (EDP)

This is designed to help a person in strengthening & fulfilling his Entrepreneurial
Motive & in acquiring required skills & capabilities to become a successful
Entrepreneur. Towards this end, it is necessary to promote his understanding of
Motives & Motivational Pattern, their Impact on Behavior & Entrepreneurial Value. A
Program which seeks to do that can be called an Entrepreneurial Development
Programme (EDP).
EDP is primarily meant for developing those First Generation Entrepreneurs who on
their Own cannot become Successful Entrepreneurs, it covers 3 Major Variables: i)
Location ii) Target Group iii) Enterprise (Entrepreneurial Activities).
In fact, any one of the above three variables can be used as a Starting Point for initiating &
implementing an EDP. The remaining Two then will follow by making the proper
synthesis with the first.
Example 1: If the Object is to develop Backward North Karnataka Regions, then the
Potential Target Group & feasible Entrepreneurial Ventures must follow.
Example 2: If the Objective is to Promote IT based Enterprises, suitable Target Group &
Location must match.
EDP by itself mainly aims at achieving Specific Objectives of the Programmes &
therefore cannot create any Magical Result. It is a Continuous Process of Training &
Motivating & then to set up Profitable Enterprises in Large Numbers.
Need for EDPS:
 Builds confidence in people
 Gives guidelines to the young
 Gives technical assistance, management, training consultancy.
 Channelizes them to accelerate industrialization
 It is helpful in growth of small scale section.

Entrepreneurship in India
Entrepreneurship is regarded as closely associated with the Economic History of India.
This is traced way back to even as early as Rig Veda, when Metal Handicrafts
manufacturing cottage & small enterprises existed in the Country.
It has passed through several Ups & Downs. The important ones include the Decline of
Indian Handicrafts Industry towards the end of the 18 th Century, entry of the East India
Company of the British’s in India’s Business Activities. The Swadeshi Campaign for
Indian Manufactured Goods, the First World War, Emergence of the Indian Managing
Agency Systems by promoting Joint Stock Companies, the Second World War, Partition
of Undivided India & undertaking planned development of Entrepreneurship in the
Country by Govt of India after Independence in 1947.
For the purpose of encouraging Entrepreneurship, the Govt of India brought out the
First Industrial Policy Resolutions in 1948 which was subsequently revised from Time
to Time. The Govt of India in order to promote, assist & develop industries in the
National Interest has taken the following Three Important Resolutions in the Industrial
Resolutions
i. To maintain a proper distribution of economic power between Private & Public
Sector.
ii. To encourage Rapid Industrialization by moving the concept of Entrepreneurship
from existing centers to other cities, towns & rural areas.
iii. To disseminate the Entrepreneurship acumen concentrated in a few dominant
communities to a large number of Industrially Potential People of varied Social
Background.
To achieve these Objectives the Govt accorded emphasis on the Development of Small
Scale Industries in the Country. Since the 3 rd Five Year Plan, the Govt announced
various Incentives & Concessions in the form of Capital, Technical Know How,
Reservation of Certain Items for Exclusive Manufacture in Small Scale Sector Tax
Concessions, Provision of Infrastructural Facilities like Developed Land, Sheds, Roads,
Communication etc for Promotion of Enterprises in the Country etc.
This has helped in Speedy Economic Development in all the States in the Country & to
a great extent has minimized regional imbalances.
National Common Minimum Programme (NCMP) describes Small Scale Enterprises as
the Most Employment Intensive Segment. At the beginning of the 10 th Plan, (2002 – 2003),
the Segment provided gainful employment to 24.9 Million People in the Rural & Urban
Areas of the Country thro 10.5 Million Units, engaged in Manufacturing & providing a
Wide Range of Goods & Services. If the Units in Khadi Village Industries are also taken
into account, the Employment would rise to 332 Million. Thus this is rightly called as the
segment which provides employment next only to Agriculture. The Contribution of Small
Enterprises Segment to the Economic Development of the Country is very significant. Nearly
39% of the Gross Manufacturing Output & 34% of the Exports of India arise from these
Enterprises.
Yet a large number of Entrepreneurs are facing lots of Challenges. In order to assist
them to fully harness their potential by availing of the increasing opportunities generated
by Trade Liberalization, it is necessary to not only build an enabling Policy Environment
but also supplement the former with a specific set of measures to address the
continuing challenges.
Therefore Ministry of Micro, Small & Medium Enterprises, Govt of India has
announced a package for Promoting such enterprises in Feb 07 to provide full support
in the Areas of Credit, Technological Up gradation, Marketing & Infrastructural Up
gradation in Major Industrial Infrastructure etc.

Barriers to Entrepreneurship
A large number of entrepreneurs particularly in the small enterprises fail due to several
problems and barriers. The greatest barrier to entrepreneurship is the failure of success.
Karl. H. Vesper has identified the following entrepreneurship barriers:
1. Lack of a viable concept
2. Lack of market knowledge
3. Lack of technical skills
4. Lack of seed capital
5. Lack of business know how
6. Complacency—lack of motivation
7. Social stigma
8. Time presence and distractions
9. Legal constraints and regulations
10. Monopoly and protectionism
11. Inhibitions due to patents
12. Enfold regulations
13. Obsolescence of technology or idea
14. Unstable & unpredictable markers
15. Globalization & entry of foreign goods
16. Risk all scale units generally use local resources although the market for its products
can be far

Identification of Opportunity
The reason for anyone to think of establishing an SSI unit can be summarized in single
word—opportunity. The opportunity to be your own boss, to implement your own
ideas, to earn for himself or herself is reason to think of starting an SSI unit. Starting an
SSI needs a lot of courage. To be successful, to stay in the business an entrepreneur
needs combination of hard work, skill and perseverance. Entrepreneur who starts their
own business can be grouped into two broad categories. The first category consists of
people who know exactly what they want to do and are merely looking for the
opportunity or resources to do it. These people may Preparation of Project already
developed many of skills necessary to succeed in their chosen field and are also likely
to be familiar with industry customs and practices, which can help during the start-up
phase of a new business.

The second group consists of people who want to start their own business, but do not
have definite ideas about what may would like to do. They may have developed skills
during their education or in the course of their previous employment, but many have
not be interested in opening a business in the same field of endeavor. Project
identification is concerned with the collection complication and analysis of data for the
eventual purpose of locating possible opportunities for investment and with the
development of the characteristics of such opportunities. Opportunities, according to
Drucker, are of three kinds: additive, complimentary and break-through. Adiptive
opportunities are those opportunities which enable the decision maker to better utilize
the existing resources without in any way involving a change in the character of
business. Complementary opportunities involve the introduction of new ideas and as
such do lead to certain amount of change in the existing structure. Breakthrough
opportunities on the other hand, involve fundamental changes in both the structure
and character of business. Additive opportunities involve the least amount of
disturbance to the existing state of affairs and hence the least amount of risk. The
element of risk is more in other two opportunities. Project identification cannot be
complete without identifying the characteristics of the project. Every project has three
elements—inputs, outputs and social costs and benefits. The input characteristics
define what the project will consume in terms of raw material, energy, manpower,
finance and organizational setup. The native and magnitude of these inputs must be
determined in order to make the input characteristics explicit. The output
characteristics of a project define what the project will generate in the form of goods
and services, employment revenue etc. The quantity and quality of all these output
should be clearly specified. In addition every project will have impact on society. It
inevitably affects the current equilibriums of demand and supply in the economy. It is
necessary to evaluate carefully the sacrifice which the society will be required to make
and the benefits will not accrue to the society from a given project.

Feasibility Study
Project feasibility analysis is carried out to ensure viability of project. The important
project feasibility study is
1. Market feasibility
2. Technical feasibility
3. Financial feasibility
4. Economic feasibility
5. Ecological feasibility

Market feasibility
Market feasibility is concerned with two aspects the aggregate demand for the
proposed product/service, the market share of the project under consideration. For this
market analysis requires variety of information and appropriate forecasting methods.
The kind of information required is
● Consumption trends in the past and the present consumption level
● Past and present supply position
● Production possibilities and constraints
● Imports and exports
● Structure of competition
● Cost structure
● Elasticity of demand
● Consumer behavior, intentions, motivations, attitudes, preferences and requirements
● Distribution channels
● Administrative, technical and legal constraints

Technical feasibility
Technical analysis seeks to determine whether prerequisites for successful
commissioning of the project have been considered and reasonably good choices have
been made with respect to location, size, and so on. The important questions raised in
technical analysis are:
● Has the availability if raw material, power, and other inputs been established?
● Is the selected scale of operation optimal?
● Is the production process chosen suitable?
● Are the equipment and machines chosen appropriate?
● Have the auxiliary equipment and supplementary engineering works been provided
for?
● Has provision been made for treatment of effluents?
● Is the proposed layout of the site, buildings and plant sound?
● Have work schedules been drawn up realistically?
● Is the technology proposed to be employed appropriate from the social point of
view?

Financial feasibility
Financial analysis is necessary as ascertain whether the propose project is financially
viable in the sense of being able to meet the burden of servicing dept and whether the
propose project will satisfy the return expectations of those who provide the capital.
The aspects to be looked into while conducting financial appraisal are as follows.
● Investment outlay and cost of project
● Means of financing.
● Project profitability
● Break-even point
● Cash shows of the project
● Investment worthiness judged in terms of various criteria of merit
● Project financial position
● Level of risk

Economic/Social Cost-benefit feasibility

This is concerned with judging a project from the larger social point of view, where in
the focus if on social costs and benefits of a project, which may often be different from
its monitory costs and benefits. The questions to be answered in social cost-benefit
analysis are as follows.
● What are the direct economic benefits and costs of the project measured in terms of
shadow (efficiency) prices and not in terms of market prices?
● What would be the impact of the project on the distribution of income in the society?
● What would be the impact of the project on the level of savings and investment in the
society?
● What would be the contribution of the project towards the fulfillment of certain like
self-sufficiency, employment and social order?

MODULE 4- PREPARATION OF
PROJECT

4.1 MEANING OF PROJECT

An entrepreneur takes numerous decisions to convert his business idea into a running
concern. His/her decision making process starts with project/product selection. The
project selection is the first corner stone to be laid down in setting up an enterprise. The
success or failure of an enterprise largely depends upon the project. The popular English
proverb “well began is half done” applies to project selection also indicates the significant
of good beginning.

The dictionary meaning of project is that is a scheme, design a proposal of

something intended or devised to be achieved. Newman and his associates define that “a
project has typically has a distinct mission that it is designed to achieve and clear
termination point, the achievement of the mission. Gillinger defines project “as a whole
complex of activities involved in using resources to gain benefits”. According to
Encyclopaedia of management, “a project is an organized unit dedicated to the
attainment of goal—the successful completion of a development project on time, within
budget, in conformance with predetermined programme specifications.” Now, a project
can be defined as a scientifically evolved work plan devised to achieve a specific objective
within a specified period of time. Project can differ in their size, nature of objectives, time
duration and complexity.

However projects partake of the following three basic attributes:

(i) A course of action
(ii) Specific objectives and
(iii) Definite time perspectives.
Every project has starting point, an end point with specific objectives.

PROJECT LIFE CYCLE

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 Figure 4-1: The Project Life Cycle

4.2 PROJECT IDENTIFICATION

Often indenting entrepreneurs always are in search of project having a good market but
how without knowing the product coat they determine market whose market they find
out without knowing the item i.e. product? Idea generation about a few projects provides
a way to come out of the above tangle.

Idea Generation

The process of project selection starts with idea generation. In order to select most
promising and profitable project, the entrepreneur has to generate large number of ideas
about the possible projects he can take. The project ideas can be discovered from various
internal and external sources. These may include:
(i) Knowledge of potential customer needs.
(ii) Personal observation of emerging trends in demand for certain products.
(iii) Scope for producing substitute product.
(iv) Trade and professional magazines which provide a very fertile source of project ideas.

2
(v) Departmental publications of various departments of the government.
(vi) Success stories of known entrepreneurs or friends or relatives.
(vii) A new product introduced by the competitor.
(viii) Ideas given by knowledgeable persons.
All these sources putting together may give few ideas about the possible projects to be
examined among which the project must be selected. After going through these sources
if an entrepreneur has been able to get six project ideas, one project idea will be finally
selected going through the following selection process.

4.3 PROJECT SELECTION

Project selection starts once the entrepreneur has generated few ideas of project. After
having some ideas, these project ideas are analyzed in the light of existing economic
conditions, market conditions, and the government policy and so on. For this purpose a
tool is generated used what is called SWOT analysis. The intending entrepreneur
analyses his strengths and weaknesses as well as opportunities/competitive
advantages and threats/challenges offered by each of the project ideas. In addition the
entrepreneur needs to analyze other related aspects also like raw material, potential
market, labour, capital, location and forms of ownerships etc. Each of these aspects has
to be evaluated independently and in relation to each of these aspects. On the basis of
this analysis, the most suitable idea is finally selected to convert it into an enterprise.
The process involved in selecting a project out of few projects is also termed as
“Zeroing in Process”.

S W
(Strengths) (Weakness
es)
O T
(Opportunit (Threats)
ies)

A few Important Criteria for selection are given below:

Investment Size: This is a very important criterion to decide success or failure of the
Project. The Entrepreneur should assess the Economical Size of the Plant & the Total
Investment required & should assess his Financial Capability to pool in at least about
25 % of the Investment required for the Project. Entrepreneur therefore, should select
only such Projects which are within his financial resources. You cannot establish an 3
Enterprise only on borrowed funds & this may lead to severe financial problems in the
Initial Stages of the Project Implementation itself.
Location: Location chosen should have Good Infrastructural Facilities like Good
Approach Road, Transportation Facilities, Communication Facilities, Availability of
Power, and Water & required Labor. Also, Location chosen should have good
proximity to the Raw Materials as well as to the Market. Entrepreneurs should also
examine the Concessions & Incentives offered for a Particular Location as per the Govt.
Industrial Policy. It is also advisable to select a location nearer to bigger cities or
Industrially Forward Areas rather than setting up an Enterprise in Remote rural or
Backward Areas just for the sake of getting better or higher incentives offered by the
Govt.

Technology: The Project chosen should not be for a Product which requires
sophisticated technology, necessitating Foreign Technical Collaboration. It is better to
go in for a Product with a proven technology that is indigenously available & where the
Entrepreneur himself is well versed with the required technology.

Plant & Machineries: When deciding on a Project, the Entrepreneur should assess the
availability of High Quality Plant & Machineries indigenously. As far as possible, a
New First Project by the Entrepreneur should not be planned on Imported Plant &
Machineries because of the problems & delays invariably associated with Imports. This
may lead to Cost Escalation of the Project, & may affect the implementation schedule of
the Project. One should remember that one should not compromise on the Quality of
the Equipment even if there are little expensive in the beginning, as they will pay back
in the Long Run due to uninterrupted working. Cheap Poor Quality equipment leads
to frequent breakdowns.

Marketing: The Success of any Enterprise finally depends on Marketing Capability of

ones Goods
/ Products / Services. It is not advisable to get into a Project particularly the first,
which would mean survival amidst Cut Throat Competition involving Direct Selling to
a large number of Ultimate Customers. One should go in for Products with a Limited
Number (say 10 or 15) of established Industrial Customers.

This also means that there is a Time Interval involved in between Projects
Identification & Final Projects Selection.
4.4 CONTENTS OF A PROJECT REPORT

The significance of project report as discussed above makes it clear that there is no 4
substitution for business plan or project report and there are no shortcuts to prepare it.
The more concrete and complete project report not only serves as road map but also
earns the respect of outsiders who support in making and running an enterprise. Hence
project report should be prepared with great care and consideration. A good project
report should contain the following.
(1) General information: Information on product profile and product details.
(2) Promoter: His/her educational qualification, work experience, project related
experience.
(3) Location: exact location of the project, lease or freehold, location advantages.
(4) Land and building: land area, construction area, type of construction, cost of
construction, detailed plan and estimate along with plant layout.
(5) Plant and machinery: Details of machinery required, capacity, suppliers, cost,
various alternatives available, cost of miscellaneous assets.
(6) Production process: Description of production process, process chart, technical
know-how, technology alternatives available, production programme.
(7) Utilities: Water, power, steam, compressed air requirements, cost estimates sources
of utilities.
(8) Transport and communication: Mode, possibility of getting costs.
(9) Raw material: List of raw material required by quality and quantity, sources of
procurement, cost of raw material, tie-up arrangements, if any for procurement of raw
material, alternative raw material, if any.
(10) Man power: Man power requirement by skilled and semi-skilled, sources of
manpower supply, cost of procurement, requirement for training and its cost.
(11) Products: Product mix, estimated sales distribution channels, competitions and
their capacities, product standard, input-output ratio, product substitute.
(12) Market: End-users of product, distribution of market as local, national,
international, trade practices, sales promotion devices, and proposed market research.
(13) Requirement of working capital: Working capital required, sources of working
capital, need for collateral security, nature and extent of credit facilities offered and
available.

(14) Requirement of funds: Break-up project cost in terms of costs of land, building
machinery, miscellaneous assets, preliminary expenses, contingencies and margin
money for working capital, arrangements for meeting the cost of setting up of the
project.
(15) Cost of production and profitability of first ten years.
(16) Break-even analysis.
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(17) Schedule of implementation.

4.5 FORMULATION OF PROJECT REPORT

A project report is like a road map. It is an operating document. What information and
how much information it contain depends upon the size of the enterprise, as well as
nature of production. For example small-scale enterprises do not include technology
which is used for preparing project reports of large-scale enterprises. Within small-
scale enterprises too, all information may not be homogeneous for all units. Vinod
Gupta has given a general set of information in his study “Formation of a project
report.” According to Gupta, project formulation divides the process of project
development into eight distinct and sequential stages as below:
(1) General information
(2) Project description
(3) Market potential
(4) Capital costs and sources of finance
(5) Assessment of working capital requirements
(6) Other financial aspects
(7) Economical and social variables
(8) Project implementation

The nature of formation to be collected and furnished under each of these stages has
been given below.
(1) General Information
The information of general nature given in the project report includes the following:
Bio-data of promoter: Name and address, qualifications, experience and other
capabilities of the entrepreneur. Similar information of each partner if any.
Industry profile: A reference analysis of industry to which the project belongs, e.g., past
performance; present status, its organization, its problems etc.

Constitution and organization: The constitution and organization structure of the

enterprise; in case of partnership firm its registration with registrar of firms,
certification from the Directorate of Industries /District Industry Centre.
Product details: Product utility, product range, product design, advantage to be
offered by the product over its substitutes if any.

(2) Project Description

A brief description of the project covering the following aspects should be made in the
project report. 6
Site: Location of the unit; owned, rented or leasehold land; industrial area; no objection
certificate from municipal authorities if the enterprise location falls in the residential
area.
Physical Infrastructure: Availability of the following items of infrastructure should be
mentioned in the project report.
(a) Raw material: Requirement of raw material, whether inland or imported, sources
of raw material supply.
(b) Skilled labour: Availability of skilled labour in the area i.e., arrangements for
training labourers in various skills.
(c) Utilities: These include:
(i) Power: Requirement of power, load sanctioned, availability of power
(ii) Fuel: Requirement of fuel items such as coal, coke, oil or gas, state of their
availability and supply position.
(iii) Water: The sources of water, quality and quantity available.
(d) Pollution control: The aspects like scope of dumps, sewage system, sewage
treatment plant, infiltration facility etc., should be mentioned.
(e) Communication and transportation facility: The availability of communication
facilities, e.g., telephone, fax, telex, internet etc., should be indicated. Requirements for
transport, mode of transport, potential means of transport, approximate distance to be
covered, bottlenecks etc., should be stated in the business plan.
(f) Production process: A mention should be made for process involved in production
and period of conversion from raw material into finished goods.
(g) Machinery and equipment: A complete list of machines and equipment required
indicating their size, type, cost and sources of their supply should be enclosed with the
project report.

(h) Capacity of the plant: The installed licensed capacity of the plant along with the
shifts should also be mentioned in the project report.
(i) Technology selected: The selection of technology, arrangements made for acquiring
it should be mentioned in the business plan.
(j) Other common facilities: Availability of common facilities like machine shops,
welding shops and electrical repair shops etc should be stated in the project report.
(k) Research and development: A mention should be made in the project report
regarding proposed research and development activities to be undertaken in
future.

(3) Market Potential

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While preparing a project report, the following aspects relating to market potential of
the product of the product should be stated in the report.
(a) Demand and supply position: State the total expected demand for the product and
present supply position, what is the gap between demand and supply and how much
gap will fill up by the proposed unit.
(b) Expected price: Expected price of the product to be realized should also be
mentioned.
(c) Marketing strategy: Arrangements made for selling the product should be clearly
stated in the project report.
(d) After sales service: Depending upon the nature of the product, provisions made for
after-sales should normally be stated in the project report.

(4) Capital Costs and Sources of Finance

An estimate of the various components of capital items like land and buildings, plant
and machinery, installation costs, preliminary expenses, margin of working capital
should be given in the project report. The sources should indicate the owners funds
together with funds raised from financial institutions and banks.

(5) Assessment of Working Capital

The requirement for working capital and its sources of supply should clearly be
mentioned. It is preferred to prepare working capital requirements in the prescribed
formats designed by limits of requirement. It will reduce the objections from banker’s
side.

(6) Other Financial Aspects

To adjudge the profitability of the project to be set up, a projected profit and loss
account indicating likely sales revenue, cost of production, allied cost and profit should
be prepared. A projected balance sheet and cash flow statement should also be
prepared to indicate the financial position and requirements at various stages of the
project. In addition to this, the break-even analysis should also be presented. Break-
even point is the level of production at which the enterprise shall earn neither profit
nor incur loss. Breakdown level indicates the gestation period and the likely
moratorium required for repayment of the loans. Break-even point is calculated as
Break-Even Point (BEP) = F/S–V
Where F = Fixed
Cost S = Selling
Price/Unit V =
Variable 8
Cost/Unit
The break-even point indicates at what level of output the enterprise will break even.
(7) Economical and Social Variables
Every enterprise has social responsibility. In view of the social responsibility of
business, the abatement costs, i.e., the costs for controlling the environmental damage
should be stated in the project. Arrangements made for treating the effluents and
emissions should also be mentioned in the report. In addition the following socio-
economic benefits should also be stated in the report.
(i) Employment Generation
(ii) Import Substitution
(iii) Ancillaration
(iv) Exports
(v) Local Resource Utilization
(vi) Development of the Area

(8) Project Implementation

Every entrepreneur should draw an implementation scheme or a time-table for his
project to the timely completion of all activities involved in setting up an enterprise. If
there is delay in implementation project cost overrun. Delay in project implementation
jeopardizes the financial viability of the project, on one hand, and props up the
entrepreneur to drop the idea to set up an enterprise, on the other. Hence there is need
to draw up an implementation schedule for the project and then to adhere to it.

4.6 PLANNING COMMISSION GUIDELINES

In order to process investment proposals and arrive at investment decisions, the

planning Commission has issued guidelines for preparing/formulating industrial
projects. The guidelines have been summarized as follows:

1. General information: The feasibility report should include an analysis of the industry
to which the project belongs. It should deal with the past performance of the industry.
The description of the type of industry should also be given, i.e., the priority of the
industry, increase in production, role of the public sector, allocation of investment of
funds, choice of technique, etc. This should contain information about the enterprise
submitting the feasibility report.

2. Preliminary analysis of alternatives: This should contain present data on the gap
between demand and supply for the outputs which are to be produced, data on the 9
capacity that would be available from projects that are in production or under
implementation at the time the report is prepared, a complete list of all existing plants
in the industry, giving their capacity and their level of production actually attained, a
list of all projects for which letters of intent licenses have been issued and a list of
proposed projects. All options that are technically feasible should be considered at this
preliminary stage. The location of the project and its implications should also be looked
into. An account of the foreign exchange requirement should be taken. The profitability
of different options should also be looked into. An account of the foreign exchange
requirement should be taken. The profitability of different options shou1d also be
given. The rate of return on investment should be calculated and presented in the
report. Alternative cost calculations vis-à-vis return should be presented.

3. Project description: The feasibility report should provide a brief description of the
technology/process chosen for the project. Information relevant for determining the
optimality of the location chosen should also be included. To assist in the assessment of
the environmental effects of a project every feasibility report must present the
information on specific points, i.e., population, water, land, air, flora, fauna, effects
arising out of the project’s pollution, other environmental destruction, etc. The report
should contain a list of important items of capital equipment and also the list of the
operational requirements of the plant, requirements of water and power, requirements
of personnel, organizational structure envisaged, transport costs, activity wise phasing
of construction and factors affecting it.

4. Marketing plan: It should contain the following items: Data on the marketing plan,
demand and prospective supply in each of the areas to be served. The methods and the
data used for making estimates of domestic supply and selection of the market areas
should be presented. Estimates of the degree of price sensitivity should be presented. It
should contain an analysis of past trends in prices.

5. Capital requirements and cost: The estimates should be reasonably complete and
properly estimated. Information on all items of costs should be carefully collected and
presented.

6. Operating requirements and costs: Operating costs are essentially those costs which
are incurred after the commencement of commercial production. Information about all
items of operating cost should be collected. Operating costs relate to cost of raw,
materials and intermediaries, fuel, utilities, labour, repair and maintenance, selling
expenses and other expenses.
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7. Financial analysis: The purpose of this analysis is to present some measures to asses
the financial viability of the project. A Performa balance sheet for the project data
should be presented. Depreciation should be allowed for on the basis specified by the
Bureau of Public Enterprises. Foreign exchange requirements should be cleared by the
Department of Economic Affairs. The feasibility report should take into account income
tax rebates for priority industries, incentives for backward areas, accelerated
depreciation, etc. The sensitivity analysis should also be presented. The report must
analyze the sensitivity of the rate of return on the level and pattern of product prices.
8. Economic analysis: Social profitability analysis needs some adjustments in the data
relating to the costs and return to the enterprise. One important type of adjustment
involves a correction in input and cost, to reflect the true value of foreign exchange,
labour and capital. The enterprise should try to assess the impact of its operations on
foreign, trade. Indirect costs and benefits should also be included in the report. If they
cannot be quantified they should be analyzed and their importance emphasized.

4.7 MEANING AND SIGNIFICANCE OF PROJECT REPORT (Need and

Significance)

A project report or a business plan is a written statement of what an entrepreneur

proposes to take up. It is a kind of guide frost or course at action what the entrepreneur
hopes to achieve in his business and how is he going to achieve it. A project report
serves like a kind of big road map to reach the destination determined by
entrepreneur. Hence a project report can be defined as a well evolved course of action
devised to achieve the specified objectives within a specified period of time. It is like an
operating document.

The preparation of project report is of great significance for an entrepreneur. The

project report serves two essential purposes. The first is the project report is like a road
map it describes the direction the enterprise is going in, what its goals are, where it
wants to be, and how it is going to get there. In addition it enables the entrepreneur to
know that he is proceeding in the right direction. Dan Steinhoff and John F. Burgess
hold the view that without well spelled out goals and operational methods, most
businesses flounder on the rocks of hard times.

The second purpose of the project report is to attract lenders and investors. The
preparation of project report is beneficial for those small scale enterprises which apply
for financial assistance from the financial institutions and commercial banks. On the
basis of this project report the financial institutes make appraisal and decide whether
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financial assistance should be given or not. If yes how much. Other organizations
which provide various assistance like work shed/land, raw material etc, also make
decision on the basis of this project report.

Project report includes information on following aspects:

• Economic Aspects
• Technical Aspects
• Financial Aspects
• Production Aspects
• Managerial Aspects

4.8 Enterprise resource planning Definition:

Enterprise resource planning system is a fully integrated business management system

covering functional areas of an enterprise like Logistics, Production, Finance,
Accounting and Human Resources. It organizes and integrates operation processes and
information flows to make optimum use of resources such as men, material, money
and machine.

Importance of ERP
ERP delivers a single database that contains all data for the software modules, which
would include:
• Manufacturing: Engineering, bills of material, scheduling, capacity, workflow
management, quality control, cost management, manufacturing process,
manufacturing projects, manufacturing flow.

• Supply chain management: Order to cash, inventory, order entry, purchasing,

product configuration, supply chain planning, supplier scheduling, and
inspection of goods, claim processing, and commission calculation.

• Financials: General ledger, cash management, accounts payable, accounts

receivable, fixed assets

• Project management: Costing, billing, time and expense, performance units,

activity management.

• Human resources: Human resources, payroll, training, time and attendance,

roistering, benefits.

• Customer relationship management: Sales and marketing, commissions, service,

customer contact and call center support, Data warehouse and various self-
service interfaces for customers, suppliers, and employees.

• Access control: user privilege as per authority levels for process execution.
Customization
- to meet the extension, addition, change in process flow.

4.9 Functional areas of Operation/Functional areas of management of ERP

1. Marketing and Sales (M/S)

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2. Supply Chain Management (SCM)
3. Accounting and Finance (A/F)
4. Human Resources (HR)
Business functions: Activities specific to a functional area of operation

Figure 4-2: Examples of functional areas of operation and their business functions

• Functional areas are interdependent

– Each requires data from the others
• Better integration of functional areas leads to improvements in communication,
workflow, and success of company
• Information system (IS): Computers, people, procedures, and software that store,
organize, and deliver information
• Collection of activities that takes one or more kinds of input and creates an
output that is of value to customer
– Customer can be traditional external customer or internal customer
• Thinking in terms of business processes helps managers to look at their
organization from the customer’s perspective
• Example: A fictitious coffee shop
– Examine business processes of the coffee shop
– See why coordination of functional areas helps achieve efficient and
effective business processes
– Look at how integration of the information system improves the business
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1. Marketing and sales
• Functions of Marketing and
 Sales Developing products
Determining pricing
Promoting products to
customers Taking
customers’ orders Helping
create a sales forecast

• Marketing and Sales tasks for the coffee shop

– Formal record keeping not required
– Need to keep track of customers
– Product development can be done informally
– Good repeat customers allowed to charge purchases—up to a point
• Records must show how much each customer owes and his or her
available credit

Figure 4-3: The Marketing and Sales functional area exchanges data with customers
and with the Human Resources, Accounting and Finance, and Supply Chain
Management functional areas

2. Supply Chain Management

• Supply chain management (SCM) is the active management of supply chain
14
activities to maximize customer value and achieve a sustainable competitive
advantage.
 • It represents a conscious effort by the supply chain firms to develop and run
supply chains in the most effective & efficient ways possible.
• Supply chain activities cover everything from product development, sourcing,
production, and logistics, as well as the information systems needed to
coordinate these activities.
• Needs information from various functional areas
• Production plans based on information about product sales (actual and projected)
that comes from Marketing and Sales
• With accurate data about required production levels:
• Raw material and packaging can be ordered as needed
• Inventory levels can be kept low, saving money
• Functions within Supply Chain Management
• Making the coffee (manufacturing/production)
• Buying raw materials (purchasing)
• Production planning requires sales forecasts from M/S functional area
• Sales forecasts: Analyses that attempt to predict the future sales of a
product
• Production plans used to develop requirements for raw materials and packaging
• Raw materials: Bottled spring water, fresh lemons, artificial sweetener, raw
sugar
• Packaging: Cups, straws, napkins
• SCM and M/S must choose a recipe for each coffee product sold

15

Figure 4-4: The Supply Chain Management functional area exchanges data with suppliers
and with the Human Resources, Marketing and Sales, and Accounting and Finance
functional areas

3. Accounting and Finance

• Functions within Accounting and Finance

– Recording raw data about transactions (including sales), raw material
purchases, payroll, and receipt of cash from customers
• Raw data: Numbers collected from sales, manufacturing and other operations,
without any manipulation, calculation, or arrangement for presentation
• Data from Accounting and Finance used by Marketing and Sales and Supply
Chain Management
– Sales records are important component of sales forecast
– Sales forecast is used in making staffing decisions and in production
planning
– Records from accounts receivable used to monitor the overall credit-
granting policy of the coffee shop

Figure 4-5: The Accounting and Finance functional area exchanges data with customers and
with the Human Resources, Marketing and Sales, and Supply Chain Management functional
areas

4. Human Resources
The basic function of HR is to ensure the availability of competent employees to work
positively towards the realization of organizational objectives. The functions of HR can
be classified into managerial functions and operative functions. 16

1. Managerial functions: The five important functions of HR in an organization are

planning, organizing, staffing, directing and controlling. Planning is a course of action
required to achieve organizational objectives. For an HR manager planning involves
forecasting the quantity and quality of the workplace required. Organizing refers to
developing an organizational structure , defining, and allocating roles and
responsibilities, delegating authority and making the workforce accountable as when
required. Staffing involves filling up the existing vacancies with the right quantity and
the right quality of people at the right time. Directing function refers to leading,
guiding and motivating the employees of organization for achieving organization
objectives. The

controlling function refers to reviewing organizational plans to identify deviations and

to take corrective and preventive measures to overcome deviations.

2. Operative Functions: The operative functions of HR are: Human resource

planning(HRP)
,recruitment and selection, placement and induction, training and development
,compensation, performance appraisal, health and safety, industrial relations and
managing exit.

Figure 4-6: The Human Resources functional area exchanges data with the
Accounting and Finance, Marketing and Sales, and Supply Chain Management
functional areas

4.10 Types of Project Report

1. Status Report
This is the most common type of project report and the one that you probably find
yourself working on most regularly. You can produce status reports weekly or monthly
17
– and on one project recently you ended up producing daily status reports during the
implementation phase. The frequency depends on where you are in the project and
how much there is to say. There’s not much point reporting daily if your tasks all
take over a week, as you won’t have any progress to report from day to day. As you
will spend a fair amount of time producing status reports, it is worth considering ways
to make it faster to write them. Better yet, automate as much reporting as possible.
Create a standard status report template or use the one that comes with your project
management software (you can check out the reporting features of our tool here as an
example), and use the data in your scheduling tool to populate the project progress.
Even if you have to amend it afterwards, having some of the fields completed for you
will still save you a lot of time.

2. Risk Report
The report is normally the output that comes after a risk review meeting. Of course,
you can update your risk log at any time, and you should be encouraging all your
project team members to contribute risks to the log whenever they feel something
needs recording. The risk report should include a summary of the risk profile of the
project, but how you present this is up to you. A good approach would be to only
include the detail for the risks that have the potential to create the most problems for
your project. Then include a statement on the lower-level risks, perhaps summarizing
how you are managing all of these. You will also want the possibility of producing a
report about all your risks, regardless of how significant they are. It’s probably easiest
to do this as an automated download from your project management software, or if
you keep your risk log in another format like a spreadsheet, by issuing a complete copy
of that document.

3. Board/ Executive Report:

Reports need to be tailored to the people who are going to read them. So the report you
produce for the project board will have a different level of detail in it to the weekly
status update that goes to your project team and key business stakeholders. For the
project board reports, think high level. They will want to read about things that are
important to them, like issues they can help resolve, a summary of the budget position,
and whether or not you are on track to hit key milestones. Make sure that your board
report is in a format that they can easily read. For example, if your executives are
always on the road and use their smartphones to check emails, don’t produce your
report in the form of a complicated spreadsheet that won’t display correctly, or include
loads of large graphics that will take ages to download. A pdf will render across 18
devices if you’re emailing a static report. Or you can grant licenses for board members
or senior leadership so they can see real-time dashboard reports on the go.
4. Resource Report

The resource report will show you the breakdown of which project team member is
allocated to which task on which day. They can also be used to pinpoint over allocation
problems – where a team member is allocated to more than one task. Obviously they
can’t work on two things at once, so if you don’t pick up these problems you’ll find that
your project plan slips behind schedule. Use the resource report to ensure that you
haven’t got clashes for individuals and reschedule those tasks as necessary. Resource
reports can also be useful for scheduling more than one person. You’ll be able to see
when someone becomes available, and that is a good sign that they can be given more
project tasks at that point. If you compare the resource availability to the project’s
timeline you can also plan more efficiently. As one task done by one person ends, you
can make sure that someone else is available to pick up the next thing that needs to be
done, so that tasks don’t stop halfway through waiting for the next person to become
available. Overall, resource reports are one of the most useful types of project reports to
be had as a project manager, although they can be a bit difficult to interpret at first. It
really is worth spending the time getting to know how to read the reports so that you
can make changes to your project schedule as appropriate. The right software is going
to help you as a project manager. We developed the project reporting and dashboard
features of ProjectManager.com to help project managers simplify this fundamental
task. The template reports of our software will provide a needed head start on
monitoring your projects.

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